operations or use digital fingerprinting technology to prevent copyright infringement by its
users.^190
(s) Perfect 10 v. MegauploadIn Perfect 10, Inc. v. Megaupload Limited,^191 the defendant operated a file storage service
through the “Megaupload” web site (among others), which allowed users to upload files. After
upload, the web site created a unique URL to the file, and anyone with the URL could then
download the file from Megaupload’s servers. Both Megaupload and its users disseminated
URLs for various files throughout the Internet. In order to view, copy, or download files from
the web sites without a waiting period, users were required to pay a membership fee. The
plaintiff sued the defendants for direct and secondary copyright infringement because thousands
of its copyrighted photographs were uploaded to Megaupload and available for downloading.
Those photos contained copyright notices and were labeled “Perfect 10” or “Perfect-10.” The
complaint alleged that Megaupload depended on, and provided substantial payouts to, affiliate
web sites who catalogued the URLs providing access to a mass of pirated content on
Megaupload’s servers, and that Megaupload encouraged its users to upload materials through a
rewards program. The defendant moved to dismiss the direct and secondary liability claims.^192
With respect to the direct infringement claim, the court noted that under Netcom, an
important element of direct infringement is volitional conduct, and the element of volitional
conduct applies to all exclusive rights under the copyright act.^193 Drawing all reasonable
inferences in the plaintiff’s favor, the court found that the plaintiff had adequately pled a claim
for direct infringement:
Megaupload serves as more than a passive conduit, and more than a mere “file
storage” company: it has created distinct websites, presumably in an effort to
streamline users’ access to different types of media (e.g., megaporn.com,
megavideo.com); it encourages and, in some cases pays, its users to upload vast
amounts of popular media through its Rewards Programs; it disseminates URLs
for various files throughout the internet; it provides payouts to affiliate websites
who maintain a catalogue of all available files; and, last, at a minimum, it is
plausibly aware of the ongoing, rampant infringement taking place on its(^190) “Hotfile To Pay $80M to MPAA, Studios In Copyright Suit,” Law360 (Dec. 3, 2013), available as of Dec. 7,
2013 at http://www.law360.com/ip/articles/493076?nl_pk=be5fde4e-8dc1-4d81-b621-
f0352bcdff74&utm_source=newsletter&utm_medium=email&utm_campaign=ip.
(^191) 2011 U.S. Dist. LEXIS 81931 (S.D. Cal. July 27, 2011).
(^192) Id. at 3-5.
(^193) Id. at 10.